Revision as of 18:21, 19 November 2023 by Admin (Created page with "'''Solution: D''' The price of the first bond is <math display = "block"> 1000(0.05/\,2)a_{\overline{30 \times 2}|0.05/2}+1200(1+0.05/\,2)^{-50\times2}=25a_{\overline{60}|0.025}+1200(1.025)^{-60} = 772.72 + 272.74 = 1, 045.46. </math> The price of the second bond is also 1,045.46. The equation to solve is <math display = "block"> 1,045.46=25a_{{\overline{{60}}}|j/2}+800(1+j\ /2)^{-60} </math> The financial calculator can be used to solve for j/2 = 2.2% for j = 4.4%...")
Exercise
ABy Admin
Nov 19'23
Answer
Solution: D
The price of the first bond is
[[math]]
1000(0.05/\,2)a_{\overline{30 \times 2}|0.05/2}+1200(1+0.05/\,2)^{-50\times2}=25a_{\overline{60}|0.025}+1200(1.025)^{-60} = 772.72 + 272.74 = 1, 045.46.
[[/math]]
The price of the second bond is also 1,045.46. The equation to solve is
[[math]]
1,045.46=25a_{{\overline{{60}}}|j/2}+800(1+j\ /2)^{-60}
[[/math]]
The financial calculator can be used to solve for j/2 = 2.2% for j = 4.4%.
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